How to take control of your retirement income

Gareth Trainor

Are you getting ready to retire and planning to take a flexible income?

If you are, then you’ve come to the right place for more information. Taking a flexible income, sometimes known as drawdown, has its advantages.

For example you’ll have control over how much money you take and when. You can dip in whenever you like or you could turn your pension into a regular income, like a salary.

It offers the flexibility that many people want but it comes with some things to carefully consider too.

It’s important that after years of working we have enough money to live comfortably and enjoy our retirement – and with people generally now living longer, that could be for some time.

That’s why if you do opt to take flexible income it’s essential you understand the impact that withdrawing from your pension savings can have on how long your money might last.

If you take too much too soon, it could run out earlier than you anticipate.

flexible income illustration 

Balancing the income seesaw


If you’re taking a flexible income in retirement you’re likely to have two competing goals to balance:

  1. You need your pension savings to grow so that you build up enough money to last the length of your retirement.
  2. But you’ll probably also need to take money out to live on in the short term.

To tackle these two goals you’ll need two different approaches:

  • To give your money the best chance of growing over the longer term, you’ll need to take on some level of investment risk.
  • But for short-term money, you need to take less risk to make sure you have enough to live on.

To understand the two sides of the income seesaw it’s helpful to look at them individually before coming to an overall conclusion.

At one end: invest for the long term

Do you have enough money saved to last?

Will your pension savings give you the income you need or want for as long as you need?

And what if you want to have some left to pass on to loved ones?

These are all questions I’ve asked myself and they lead me to one answer: I’ll need to keep my pension savings invested through my retirement

By doing this, you’ll be giving your money the chance to keep on growing. As a general rule, the longer you leave your money invested, the better your chance of seeing it grow.

Of course there are no guarantees – its value can go down as well as up and you could get back less than you paid in.

The good news is that investing in retirement is easier than before. The pensions freedoms, introduced in 2015, mean people now have much more choice around how they use their pension savings.

At the other end of the seesaw: protecting your money in the short term

It’s a different story for the money you’ll need when first taking your pension savings. Although keeping your pension savings invested can potentially help support a long retirement, research shows that if the value of your investments falls in the early years, it could dramatically reduce the length of time your money will last.

Put simply, this is because if you take money out when markets are falling, it’s hard for the remaining investments to catch up. You can find out more about this in my blog on making your pension pot last.

So if you’re taking an income, it’s best to try to manage how much your investments move up and down in value – especially in the early years of your retirement.

How to balance the seesaw

One way to balance the seesaw is to invest in a different way for your short-term and longer-term needs. This way you can help meet both your need for income with your need for your money to last throughout retirement.

  • Short term: Consider lower-risk investments which shouldn’t move up and down in value too much.
  • Longer term: Think about medium-risk investments which can offer a higher return.

So overall you’re looking for a solution that takes the right amount of risk to make your pension savings last but doesn’t take too much risk with the money you need for income in the short term.

These decisions are important. So, if you need to, get advice from a financial adviser (please note there may be a cost for this).

Remember a pension is an investment. Its value can go down as well as up and it may be worth less than you paid in. Investment returns aren’t guaranteed

This blog and any responses are not financial advice and the information here is based on our understanding in January 2018.